01 Jan Quarterly Letter to Clients – December 2018
Economy and Stock Market
The U.S. economy experienced another year of expansion in 2018, completing a near-record-breaking duration of annual increases dating back to 2009. Stocks also moved up through the first three quarters of the year, but then fell sharply because of heightened concern over slowing worldwide economic growth. As a result, Standard & Poor’s 500 Index showed a net loss of 6.2% for the year, not including dividends.
Market volatility erupted in the fourth quarter, primarily to the downside. Lowering of tax rates is increasing U.S. corporate earnings, but trade and tariff disputes are helping neither our economy nor the economies of other countries, particularly China. Also, Eurozone real GDP, which rose 2.8% in the third quarter of 2017, increased just 1.6% in the third quarter of 2018. In the U.S., economists believe that real GDP probably grew at an annualized 2.5% rate in the fourth quarter, certainly a solid showing, but below the extremely strong figures reported earlier in the year.
Strength of our economy is broad-based and the unemployment rate extremely low, causing businesses to have difficulty finding qualified personnel for hiring needs. While the economy is strong, not all segments are bright spots. Higher interest rates have weighed on the housing market, which has stalled, and automobile sales have not continued prior strength, except for truck volume. Overall, however, the U.S. economy is doing well indeed. With earnings still moving up nicely, and valuations reasonable, the outlook for stocks in our view is still positive.
News at Connors Investor Services
We would like to share with you that 2019 marks the 50th anniversary for Connors Investor Services. Our mission initially was to screen small companies for ones which we thought were profitable, well managed and deserving of further in-depth research. We traveled the country to visit candidates and provided reports to subscribers which featured selected companies. Publication of research was phased out in the 1970s, but to this day, the same criteria are used for stock selection. After the Chicago Board Options Exchange was formed in 1973, we began also to use listed options to add income and reduce risk in portfolios. While we have not published research for many years, the same care and emphasis on quality are employed in day-to-day management of client portfolios.
On notes of both appreciation and sadness, we report the retirement of Bob Leayman at the end of 2018. Bob has been an important senior member of our team for 34 years, helping clients through good markets and bad. Bob will not be fully retiring, however, but rather transitioning to a consultant role. We are extremely pleased to have the continuing benefit of his expertise in this capacity.
Thank you for placing your trust in us for investment assistance – and best wishes for a healthy and happy New Year.
Peter J. Connors, CFA
Important Disclosure Information
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Connors Investor Services, Inc. (“Connors”), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Connors. Please remember to contact Connors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Connors is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the Connors’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request.
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